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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






2. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






3. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






4. The additional benefit received from the consumption of the next unit of a good or service






5. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






6. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






7. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






8. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






9. AVC = TVC/Q






10. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






11. A good for which higher income increases demand






12. 0 < Ei < 1






13. Exists if a producer can produce a good at lower opportunity cost than all other producers






14. All firms maximize profit by producing where MR = MC






15. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






16. The practice of selling essentially the same good to different groups of consumers at different prices






17. TR = P * Qd






18. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






19. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






20. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






21. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






22. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






23. Occurs when LRAC is constant over a variety of plant sizes






24. Ei = (%dQd good X)/(%d Income)






25. AFC = TFC/Q






26. The difference between total revenue and total explicit and implicit costs






27. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






28. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






29. A good for which higher income decreases demand






30. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






31. Entry (or exit) of firms does not shift the cost curves of firms in the industry






32. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






33. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






34. Models where firms are competitive rivals seeking to gain at the expense of their rivals






35. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






36. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






37. The ability to set the price above the perfectly competitive level






38. Models where firms agree to mutually improve their situation






39. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






40. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






41. Entry of new firms shifts the cost curves for all firms upward






42. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






43. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






44. Ed = 1






45. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






46. Exists if a producer can produce more of a good than all other producers






47. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






48. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






49. When firms focus their resources on production of goods for which they have comparative advantage






50. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand